Mayor Naheed Nenshi warned the NDP government against retroactively changing power contracts in a high-stakes legal battle, saying the move is “absolutely nuts” and would set a “dangerous precedent” that would scare off investment from Alberta.

Nenshi’s scathing critique was the latest in a series of blows against the government’s ongoing lawsuit involving Capital Power Corp., TransCanada Corp. and Calgary-based Enmax, which all walked away from power contracts when the province raised its carbon levy on large emitters.

Arguing the tax would increase their costs, the companies invoked an opt-out clause in their power purchase arrangements (PPAs), which allows them to terminate the deals when a change in law makes the agreements “more unprofitable.” The government disputes the provision, which it’s challenging in court.

Nenshi, a fierce opponent of the government’s litigation, escalated his criticisms of the Notley government Tuesday amid growing speculation the provincial government will legislate its way out of the conflict.

“If I were giving them advice on this, I would say ‘Holy cannoli, are you really thinking about doing this,” the mayor told reporters, insisting the move would shatter investor confidence in Alberta.

“To think (investors) have to take into account that kind of political risk as though you were investing in a place without the rule of law … That is nuts. It’s absolutely nuts.”

When pressed Monday, Premier Rachel Notley didn’t rule out legislation that would retroactively nullify certain clauses within those power pacts. The government has warned it could face $2 billion in losses from all of the money-losing contracts being returned to the Balancing Pool, a government agency.

Enmax, a utility owned by the City of Calgary, has been a vocal critic of this potential legislative tactic and the government’s lawsuit, which it calls “frivolous, vexatious and an abuse of process” in recent court records.

Nenshi fired his own shot across the bow, arguing retroactive changes to 15-year-old power contracts would send a “strong signal” that Alberta is “closed for business.”

The mayor said the move would set “the most dangerous precedent I can imagine any government setting,” especially as it seeks investors to bid on renewable power generation contracts for 20 years.

“Who would ever invest in this province, if they thought the government would just invalidate their contract decades later?” Nenshi told reporters.

When asked to respond to the mayor’s attack, the government did not refer directly to fears over retroactive legislation but instead defended its position on the lawsuit.

Energy Minister Margaret McCuaig-Boyd said in an e-mailed statement that power providers, not consumers, should cover any losses in the electricity market. She said the government is willing to negotiate with the other parties to “find a better solution.”

“We undertook this legal action to protect Albertans from serious mistakes made by the former government,” McCuaig-Boyd said.

A legal expert says it’s within government’s power to pass laws affecting contracts, such as the power arrangements, but cautioned the move would also impact the investment climate in Alberta.

“Governments can legislate; they can pass legislation that interferes with private rights, including the right of contract and the right to sue or to obtain damages,” said Sean O’Neill, a partner in the power group with McCarthy Tetrault LLP.

“Without question, it would cause investors to think twice about whether they want to invest on the terms that are being suggested.”

Wildrose MLA Don MacIntyre said the government is likely considering retroactive legislation “because they know their lawsuit is frivolous.”

“If they can’t win in court — and I’m very sure they know they can’t win this lawsuit in court — well that’s fine; we’ll just change the legislation,” MacIntyre said. “This is craziness.”

The war of words escalated as two board members resigned from the Balancing Pool, the government agency that markets electricity from older power contracts and is now stuck backstopping the money-losing PPAs at the centre of the lawsuit.

Only one official remains on the board of the Balancing Pool, which is losing about $70 million a month from the PPAs.

“They have decided not to continue with the board,” said Balancing Pool CEO Bruce Roberts.

MacIntyre said he believes the resignations were triggered by political interference in the independent agency.

McCuaig-Boyd said a recruitment process was already underway to fill the vacancies and received considerable interest with more than 100 applicants.

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